AgWired

Total Factor Productivity Key Indicator of Growth

Productivity is back on the policy agenda with rising food prices, heightened concerns about resource scarcity and increase risk from climate change, according to Dr. Keith Fuglie with the U.S. Department of Agriculture. During the release of the 2012 GAP Report published by Global Harvest Initiative during the 2012 World Food Prize, Fuglie said it’s being realized more and more that we will need to rely on total productivity growth to meet the rapid demand that is projected for global agriculture. For this to happen, agriculture will need to focus most heavily on raising yield.

The total factor productivity (TFP) concept really looks at the questions of can we get more output without having to intensity outputs (fertilizer, water, etc.)? Can we get more total output from the current bundle of resources (technology, and improved efficiency)? From this bundle of land, labor, capital and energy, can we grow output without raising this total bundle?

Fuglie says this is Important from a policy perspective because TFP is really being driven by a different set of economic and policy instruments. Primarily TFP over the long-run is conditioned by what our investments are in research and extension- getting the right technologies to the right people at the right time.

The GAP Report concludes that the majority of growth came from productivity growth in developing countries, such as Brazil and China who have increased their TFP growth strategy. One significant factor – investments and research have a critical role to play in determining whether productivity is growing.

In terms of the GAP report, the question was asked, what rate of growth productivity do we need to double output by 2050? Can this be done with just a TFP strategy and what policies would need to be in place? At least for this decade we’re on the path to double in 40 years if the current rate is maintained. However, we’ll need to maintain or accelerate research and investment and it needs to be more equitably distributed worldwide.